Tip: What to do when the Borrower Accepts a Trial Modification

Most commonly, the lender will offer a 3 (or 6) month trial modification plan, before offering a permanent loan modification. These trial plans involve specific amounts due on the first of specified months. The bankruptcy trustee makes these payments from the funds held and on hand.

The bend in the rules is that payments are deemed timely when the borrower makes the payments to the Trustee, not when the lender receives the payment. However, you need to let the Trustee know as soon as the borrower has decided to accept the trial loan modification.

Here's the tip: In order for the bankruptcy trustee to be aware of the trial modification terms, let the bankruptcy trustee know when you lodge the order to approve the trial loan modification and send them a copy of the proposed order. That way they can note the file and set aside the funds right away.